Friday, September 2, 2016
On April 19, 2016 Pepco filed an application with the Maryland Public Service Commission (PSC) to increase rates for its electric distribution service by $126,784,000. If approved by the PSC these proposed rate increases would go into effect retroactive to May 19, 2016. The PSC has suspended these increases for 150 days from the May 19, 2016 date in order to proceed with the regulatory process of determining whether the proposed rates are just and reasonable. In addition to the $126.7 million dollar rate increase request, Pepco is also seeking a rate of return on equity of 10.60% and Pepco proposed to continue its Grid Resiliency Charge (GRC) that was initially approved in Case No. 9311. Pepco proposes to accelerate improvement to priority feeders and install single phase reclosing fuse technology. Pepco is requesting $15.8 million a year for two years for a total of $31.6 million.
This rate increase request comes on the heels of a multibillion dollar merger agreement between Pepco/PHI and Exelon Corporation. This merger was highly contested by many of the parties who participated in both the Maryland and DC venues. Recently, the DC Office of the People’s Counsel (OPC) filed its petition in opposition to the $7.1 billion merger with the D.C. Court of Appeals and stated that DC OPC intends to ensure the “integrity of the legal process”. In Maryland, the Office of the Attorney General, Brian Frosh also filed an appeal of the Maryland PSC’s merger decision.
In its dissenting opinion of the merger, two Maryland PSC Commissioners Harold Williams and Anne E. Hoskins found that throughout the merger proceedings, Pepco and Exelon provided insufficient information to conclude that the merger was consistent with the public interest, under Maryland law the merger would need to actually benefit consumers for the merger to be approved. The dissenting Commissioners stated that Exelon “missed a critical opportunity to mitigate harm from this transaction by failing to propose an integrated “utility of the future” strategy to support its reliability commitments. The dissent cited the need for a more reliable system that employs a further efficiencies and a clean electricity service. In addition the dissent noted that the electricity grid of the future needs to achieve “the broad goals of promoting affordable, reliable, clean electricity”.
In failing to meet Maryland’s legal standard for merger approval, the two dissenting Commissioners cited the “Do No Harm” clause, “Rising Rates and Affordability” and “Corporate Governance and Local Control”. In its dissent, the Commissioners addressed the issue of rising electric utility bills rates and the sustainability and affordability of these costs. The Commissioners stated that the “central problem with Exelon’s misguided reliability commitment is that it has the practical effect of preauthorizing massive proposed reliability budgets without appropriate review. Indeed, Exelon has asserted that Pepco … can meet the SAIDI and SAIFI targets (reliability standards created by rule RM 43) promised in the settlement – but only if it spends all of PHI’s (Pepco’s holding company) planned five-year capital and O & M reliability-related budgets plus an additional $34 million in reliability expenditures – a total of almost $1 billion. This significant reliability spending will lead to substantial rate increases….In 2019, a typical Pepco residential customer will pay an estimated extra $180.00 per year and will have paid an additional $540 from 2015 through 2019.”
In Pepco’s Reliability Case No. 9240 final order issued by the PSC on December 21, 2011 (just months before the derecho knocked out power to our community for nearly a week), the PSC determined that Pepco had been imprudent in its management of its electric service delivery system and fined Pepco $1 million. The PSC found that Pepco’s reliability performance remained stagnated in fourth quartile or bottom half of performance. The Commission further penalized Pepco by disallowing the company to recover costs in their next rate case at the Commission because Pepco’s poor conduct had resulted in unreliable service for its customers.
Nearly five years have passed since the PSC issued a $1 million fine and additional penalties to Pepco. The company is now owned by Exelon and reliability remains stagnated in the bottom half of performance when measured by reliability indices. Hundreds of millions of dollars have been collected from ratepayers over the past 5 years. Pepco’s shareholders and executives received a billion dollar plus payout as a result of the merger. Now Pepco/Exelon is trying to ask the PSC to raise rates and collect millions more. More than 12,000 of Pepco’s Maryland customers were without power just a few weeks ago from a thunderstorm and the promised reliability of five years ago continues to elude Pepco’s ratepayers.
Powerupmontco accepts no money. We are extremely fortunate to receive pro bono services from several experts in the area of utility law including Stan Balis. Esq., Bob Loube, Ph.D, and our new attorney Mercia Arnold, Esq. Thank you all.
On Tuesday, September 6, 2016 at 6:30 p.m., the Maryland Public Service Commission will hold public hearings on Pepco’s latest rate increase request. The hearings will be held at the
Montgomery County Executive Office Building
First Floor Auditorium
101 Monroe Street
Rockville, Maryland 20850
Please plan to attend this hearing and testify before the Commission. Let the Maryland Public Service Commission know that these rate increases should not be approved until Pepco can demonstrate that it can deliver top quartile reliability for its customers.
If you cannot attend the hearing, written comments may also be filed by Friday, October 6, 2016. The comments should be addressed to David J. Collins, Executive Secretary, Maryland Public Service Commission, William Donald Schaefer Tower, 6 St. Paul Street, 16th Floor, Baltimore, Maryland 21202 and should reference “CASE NO. 9418”.
For more information contact: Powerupmontco@gmail.com
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